Energy Transition

Strong growth of renewables

In times of energy transition, decarbonization targets and public demand for denuclearization, the European energy sector has experienced – and will continue to experience – significant economic and technical transformation over the past several years and the years to come.

The sector is transitioning to a higher share of renewable energy following the objectives set by the European Union, with a targeted share of at least 32% of electricity generated from renewables by 2030. Renewable energy generation is projected to account for more than 50% of total power generation after 20351.

1 McKinsey, Global Energy Perspective 2019

Continued need for conventional energy sources requires transmission and distribution system reinforcement

It is important to note that due to the intermittent nature of renewables, a balance between renewable and conventional energy generation methods must be achieved in order to ensure security of supply. Simultaneously, the replacement of conventional electricity generation assets incorporating fossil fuels and nuclear is expected to lead to a more decentralized generation landscape, which in turn will require additional expansion in the current transmission networks and ultimately result in significant capital requirements.

Resilient long-term investment opportunities

Supporting the security of electricity supply during this transition represents historic, long-term investment opportunities with conservative risk profiles and often regulated, sustainable cash-yields in a prolonged negative-interest-rate environment. The security of supply of critical energy infrastructure is a precondition for positive economic and social development as well as necessary decarbonization.

Historically, investments in energy infrastructure have often been more resilient during economic downturns compared to traditional asset classes, as well as general infrastructure assets. International investments in energy infrastructure also benefit from additional legal protection through the Energy Charta Treaty, resulting in an attractive asset class for investors. Infrastructure, by its nature, has a long life and even renewable assets typically continue operating for 20 to 30 years or longer.